Dáil Éireann debate -
Thursday, 2 Apr 1998

Vol. 489 No. 5

Priority Questions - Telecommunications Costs.

Ivan Yates

Question:

1 Mr. Yates asked the Minister for Public Enterprise if her attention has been drawn to three recent reports from Forfás, IBEC and the Competitiveness Council in relation to the excessive cost of telecommunications and Internet charges in Ireland relative to other countries; the proposals, if any, she has to ensure a reduction in these charges; if she will consider an earlier date for the introduction of competition for voice telephony services and the provision of additional Structural Funds to Telecom Éireann to provide adequate broadband capability; and if she will make a statement on the matter. [8488/98]

Minister for Public Enterprise (Mrs. O'Rourke)

I have read the reports referred to by the Deputy and the issues raised are under consideration in my Department. Last week I met the board of Telecom Éireann to hear its response to the issues raised concerning pricing and investment in broadband services. The board accepts the need for further price reductions to improve the competitiveness of the sector and assured me it will be bringing forward substantial reductions later this year.

The principal means by which prices of telecommunications services will be brought into line with best international practice is through the implementation of effective competition in the telecommunications sector. Competition is being implemented through a clear regulatory framework, including a clearly defined role for the Director of Telecommunications Regulations, to ensure market compliance. Next week the Government will consider the future development of Cablelink as a platform for developing a state-of-the-art multimedia platform.

With regard to liberalisation of the sector on 1 January 2000, the agreement with the European Commission was entered into by the previous Government in November 1996. This timetable formed part of the strategic alliance deal with KPN-Telia which has been supported by the Union Coalition. The timetable was designed to afford Telecom Éireann time to achieve the necessary structural adjustments so that it can compete effectively in an open regime. The recent agreement with the Union Coalition on an employee share ownership scheme in Telecom Éireann was a key milestone in this regard as it prepares the way for the transformation of the company to proceed.

On the question of investment in the sector, my Department is considering, in the context of planning for the use of Structural Funds after 1999, whether funds should be dedicated to the development of broadband infrastructure to promote the availability of advanced services.

The Deputy may wish to be aware that a call for proposals will be issued shortly for the purposes of the award of ten mecu under the Economic Infrastructure Operational Programme and £2 million under the INTERREG programme for broadband infrastructure as additional funds to support the development of the information society. The Deputy may also wish to be aware that the board of Telecom Éireann informed me last week that it approached the IDA and Forfás with a view to establishing a small group to identify the precise needs of industry.

Mr. Yates

Of all the matters on the Minister's desk the issue of telecommunications costs, including leased line charges, and Internet charges is the most critical in terms of the development of the economy. While Telecom Éireann's prices have gone down by 17 per cent in recent years, is the Minister aware that reports show that, in terms of competitiveness, we are eighteenth out of 24 on the table; that leased line charges are 80 per cent higher here than in the United Kingdom, and that trunk call charges are four times higher here than in Sweden? In these circumstances will the Minister agree — I was a member of the Government which sought the derogation — that there is a case for introducing liberalisation of voice telephony services earlier than 1 January 2000 given the pace of change among our competitors who are reducing prices faster? Is the Minister prepared to contemplate this or — I understand the point she made about KPN-Telia — is it a shut case? To introduce competition, say, on 1 January 1999 a decision would have to be made rapidly in terms of the licensing arrangements.

Mrs. O'Rourke

I agree with the Deputy on the importance of this issue. The issue of telecommunications costs is of vital importance to us. As the Deputy is aware, and as indicated by Forfás and in earlier reports, there are three main centres, the Asian, United States and European centres. If we avail of every opportunity, we have the capacity to move forward. We have the people with the brains and we have the necessary structures. It is a question of approaching it in a much more dynamic way.

That is the message I tried to impart at the meeting with the board of Telecom Éireann last Thursday. It shares my concern at the reports. I made the point that it should not be so defensive in its response. As the Deputy said, the cost of calls has come down by 17 per cent. Despite this, they are still too costly. The Taoiseach and the Tánaiste have informed me that this point is made consistently in IDA reports, including those on industries which decided not to locate here. The cost of telephone calls, Internet charges and the lack of investment in broadband infrastructure are consistently highlighted. They are interlinked. I informed the board about the ESOP which was concluded the previous night. It is aware of the need to tackle the issue in a much more dynamic way and that competition is looming quickly.

As the Deputy is aware, a derogation was sought in 1993 and finally granted in the latter half of 1996 in respect of voice telephony services. It covers the period to the year 2000. We had sought a derogation to 2003. This formed part of the commercial contract and strategic alliance deal entered into by KPN-Telia with Telecom Éireann. It was envisaged at the time that there would be a sale of a 14.9 per cent stake to the workers. This did not come off but I am glad it has now been concluded.

I share the Deputy's sense of urgency on the need to introduce competition earlier than the proposed date but I am conscious that commercial and political agreements have been entered into by the strategic partner, the company and the Union Coalition. I hope the sale of Cablelink, which the Deputy supports, will proceed. Having reached agreement with the employees, the board will now work to make the company more competitive. To put to one side a commercial contract would be the incorrect path on which to travel. I am not prepared to put to one side the contract with the workers which I concluded last week concerning employee share ownership. I told Telecom Éireann clearly and openly that its telephone and Internet charges are too costly while its Internet services are too inaccessible. I have also raised the lack of infrastructure in broadband.

Mr. Yates

Section 7 of the legislation establishing the office of the Director of Telecommunications Regulations relates to price capping for a five year period which is the Minister's responsibility. Does the Minister agree with a proposal put forward by IBEC that this responsibility should be transferred to the regulator whose brief is to promote competition?

The Minister referred to broadband capability. It is estimated that the investment by Esat and Telecom is £500 million short of that which is required. Has the Government any proposals to invest Structural Funds, arising from the midterm review or in any other manner, to ensure the full roll out of broadband capability is put in place?

Mrs. O'Rourke

The Forfás report nailed down the figure of £500 million. There is no dispute about this figure or about what is needed. We gained from a disbursement of money from the EU last year to carry out this useful pilot project. We are preparing proposals for post 1999 for investment in broadband. I hope the sale of Cablelink will enable Telecom Éireann make proper and comprehensive investment in that area. I expect Telecom will pursue this route.

The Deputy is correct in pointing out that the price capping arrangement rests with the Minister for five years from the date of the legislation, namely, mid-1996. I have said enough to Telecom Éireann and will say more as necessary. In many ways Telecom Éireann is a fine company which, together with its employees, has given and continues to give great service to the State. It unveiled a very ambitious corporate plan last autumn. That plan includes foreign investment. However, it should concentrate on Ireland for the present until the infrastructure and so on is brought to a proper standard. Telecom's board is entitled to produce a corporate governance plan. It has done so and the plan contains some ambitious ideas about linking up with and investing in other countries.